Non asset-based 3PL XPO Logistics reported solid first quarter earnings last night, with total gross revenue seeing a 148.9 percent annual gain at $703.0 million and net revenue up 349.0 percent to $262.2 million.
Despite the significant gains in total gross revenue and net revenue, the company had a $14.7 million quarterly net loss, which marked an improvement compared to a $28.3 million net loss a year ago. On an earnings per share basis, the XPO said that it had a loss of $0.20 per share, with a net loss to common shareholders of $15.4 million, compared to a loss of $0.70 per share and a net loss of $29.1 million a year ago. Adjusted EBITDA for the first quarter came in at $29.2 million, up from $0.6 million a year ago.
XPO’s transportation segment, which is comprised of truck brokerage, intermodal, last-mile, expedite, and freight forwarding, had gross quarterly revenues of $562.2 million for a 99.1 percent annual gain, which was driven in large by acquisitions in intermodal and last-mile companies, with net revenue margin up 21.6 percent compared to 20.7 percent a year ago and paced by those aforementioned acquisitions and truck brokerage and last-mile margin gains.
For its logistics business, including contract logistics and related supply chain services, net revenue was $140.8 million, EBITDA was $20.1 million, and operating income was $6.4 million.
XPO Logistics Chairman and CEO Brad Jacobs told LM that the quarterly results reflect a strong performance especially on the transportation side, with last-mile, expedite, as well as increased traction on the logistics side, with strides made in various sectors, including aerospace and telecom customers.
“The gains we saw in areas like last-mile and expedite and logistics offset a weak spot in freight brokerage, and the disruption to our intermodal business with the West Coast port slowdown,” he explained. “Growing our business organically also contributed to those gains.”
And in sticking to its well-documented playbook, XPO continued to execute on its strategy of growth by acquisition announcing in this earnings released that it has agreed to acquire Bridge Terminal Transport (BTT), an asset-light drayage provide for $100 million, with the deal expected to be made official in the second quarter.
BTT arranges ground transportation through its 28-terminal network made up of about 1,300 independent owner-operators and has about 250 employees and 1,800 customers, including several multinational shippers, with XPO noting it expects this deal to expand its East Coast drayage capacity.
“BTT is an extremely well-run and well-managed drayage company and are one of the largest pure-play, asset-light drayage providers in the U.S.,” Jacobs said. “Most, but not all, of their footprint is on the East Coast, and they have a lot of customer loyalty, with its top ten customers having done business with BTT for 19 years on average.”
BTT had $232.0 million in revenue for the trailing 12 months ended March 31, 2015. XPO said BTT will be rebranded as XPO Logistics immediately, with the deal expected to nearly triple XPO’s current drayage capacity to more than 2,000 independent owner-operators.
And when the deal is made official XPO will have a total of about 6,200 independent owner-operators in its network across various sectors, including intermodal, last-mile, and expedite.
When asked what made BTT and attractive acquisition target, Jacobs explained that XPO looks at acquisitions from the point of view of customers in terms of if a specific acquisition will help XPO to better serve its customers.
“Being more efficient on the intermodal side with drayage is import to our customers,” he said. “When you look at our capacity, we now had more than 6,000 independent owner-operators under contract, with about 4,000 on the intermodal, last-mile, and expedite businesses, and are gaining critical mass in our owner-operator network.”
With this earnings announcement coming quickly after XPO’s recently-announced agreement to acquire global 3PL Norbert Dentressangle SA last week, XPO said it has raised its 2015 annual run rate revenue target to a minimum of $9.5 billion and an annual EBITDA run rate of at least $625 million by December 31, which is more than double it was three months ago.
“We believe this is a solid acquisition for XPO as it should provide significant cost synergies for its Intermodal service offering, lowering the company’s drayage costs, particularly on the East Coast where it will utilize BTT’s owner-operators to bring freight to-and-from the railhead,” wrote Deutsche Bank analyst Rob Salmon in a research note, “We believe this acquisition highlights XPO’s strong acquisition pipeline.”
Looking back at the first quarter, Jacobs said it was not surprising that the West Coast port slowdown hurt XPO’s intermodal business and was also a negative for the company’s truck brokerage business, although it served as a positive for its expedited business.
And with a diversified business model, with its widespread combination of services, at any one point in time some of these service segments may have great market conditions, whereas others may not.
“In the first quarter, intermodal had a weak market, and truck brokerage did, too, with the spot market soft in the first quarter, especially when compared to last year’s first quarter,” he said. “But we had a great quarter for last-mile, contract logistics, and expedite.”
XPO also announced that it has added a freight forwarding “cold start” location in Ft. Lauderdale, Fla. This is the 23rd cold start opening for the company, with a cold start defined by the company as establishing new operations in new cities.